Toward the Great Cleansing
Chapter 1 (Part 1 of 4) of the book
The Discovery of First Principles, Volume 3
Edward J. Dodson
[This, third volume of The
Discovery of First Principles, is made available on-line,
without charge to readers. Full rights of publication are
retained by the author. The book is divided into six chapters,
four sections per chapter, linked below at the end of each
section. Volumes 1 and 2 are available for purchase from the
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I can recall experiencing, as a
fresh college graduate [in 1925], the promptings of a vague
Wilsonian liberalism; a regret that the Senate had rejected
American membership in the League of Nations; a belief in
laissez-faire economics and the values of competition; and a
corresponding aversion to high tariffs. Beyond that, there was
only a sensitive and impressionable tabula rasa. Some
might make of this a reproach to [Princeton] university. I chalk
it up to its credit. It is the task of the university to prepare
men for the formation of their prejudices, not to impregnate
them with its own.[1] [George F. Kennan]
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On October 3, 1918, representatives of a worn out, if not quite
defeated, German nation made contact with officials of the United
States headquartered in Paris. Looking for the most favorable way out
of the war, the Germans indicated they would accept President Wilson's
Fourteen Points and lay down their arms. Edward M. House
quickly carried the German proposal to the British, French and
Italians, who argued amongst themselves over terms for nearly a month
before finally agreeing to an armistice. Soon thereafter, the armies
disengaged and began demobilization. As the dense smoke cleared and
the carnage of war was calculated, the Allied leaders began to plan
how they would carve up the territories of defeated Old World empires.
Germany's citizens were both disillusioned and confused. Victory in
the East had been complete and new territories added to the Reich.
Yet, they now learned that Ludendorff's armies had been defeated by
the Allies in the West and that Germany's own borders had been
threatened by invasion. A crisis in leadership opened the door for the
socialists, who moved quickly into the political void to establish a
government they hoped might receive favorable treatment in the coming
negotiations. Wilhelm II abdicated and fled to the Netherlands, and
Ludendorff was removed as supreme commander of the German army.
Finally, on November 11, the German delegation met with the supreme
Allied commander, Marshal Ferdinand Foch, to sign the armistice. Their
resources exhausted and their army outnumbered, the Germans had little
choice but to put their fate in the hands of Woodrow Wilson and hope
for a just peace. Time would unfortunately show that Wilson
simply did not possess the statesmanship and temperament to build a
coalition for peace. Both the French and British leaders were
committed to the survival of their own empires and the destruction of
the German and Austrian states. Historians would eventually discover
another reason for Wilson's failures: throughout his Presidency he had
apparently suffered from a serious brain disorder that caused him to
behave irrationally and impatiently in the face of any opposition.
To the French, who had suffered most at the hands of the Germans, the
time had come to claim the spoils of victory. Georges Clemenceau told
Wilson, candidly, that there could be no long-lived peace with the
Germans. Regardless of the terms of peace, Clemenceau lamented, "[t]hey
will seek only the chance of revenge." To which he added: "Nothing
will suppress the fury of those who hoped to dominate the world and
believed success so near."[2] Clemenceau and many others
among the French leaders argued that the survival of France -- and
peace on the European continent -- demanded that the Germans be denied
the ability to amass resources and manpower under a centralized
government, while making certain that France always maintained a clear
military superiority. This was, by and large, also the desire of the
majority of French citizens. Only the few socialists in the French
Parliament openly challenged Clemenceau's aims. However, although the
upheaval in Russia also stimulated socialist activism in France,
Clemenceau was far more concerned with reactions of the
ultra-nationalists and the military. Whenever Wilson pressed one or
more of his Fourteen Points or some other issue, Clemenceau simply
threatened Wilson with his resignation, assuring the U.S. President
that his successor would come from the ranks of ultra-nationalists who
would stand for nothing short of the political annihilation of the
German state. Wilson could find no way to break through the hard line
taken by both Clemenceau and Britain's Lloyd George.
Wilson put the prestige of his office on the line by personally
taking charge of the U.S. negotiations. In doing so, he ignored the
advice of most members of his cabinet and leaders of his party. He was
convinced that his leadership was essential to the successful
implementation of the peace accords and creation of the League of
Nations. With the creation of a League of Nations, he believed his
generation would not merely bring an end to war but usher in the
beginning of a new world order. Predictably, the number of individuals
in the U.S. wanting to play a role, however small, was almost endless.
Many who would rise to positions of great responsibility in the
policy-making hierarchy during the coming decades came with him to
Europe or came on their own. Yet Wilson asked virtually none of them
for advice. Of even the senior officials, notes Charles L. Mee, Jr., "Wilson
ignored all of the members of his delegation except for ... [Edward]
House."[3] Walter Lippmann, who materially assisted House
during the critical period prior to the armistice, was eased out of
the picture and eventually returned home to the United States. John
Foster Dulles, Allen Dulles, Adolf Berle, and Samuel Eliot Morison
were all part of the U.S. delegation. Mostly, they simply sat and
waited along with everyone else for some news regarding the
negotiations between Wilson, George and Clemenceau. Unsolicited, John
Foster Dulles went to the trouble of preparing a memorandum to Wilson
restating the best arguments against punishing the German people for
the crimes of their leaders. Dulles also outlined a program for
European recovery.
After his initial discussions with Clemenceau, Wilson crossed the
Channel to meet with Lloyd George, who was then standing for
re-election. The British people were demanding that Germany pay for
the costs of the war, a public demand Lloyd George's Liberal party
could not (politically) afford to ignore. Nearly 760,000 Army and
Royal Navy personnel had perished, and Britain's national debt had
climbed to over 7,000 million pounds. Much the same could be said for
Clemenceau's position with the French. The costs in lives, the
diversion of land, labor, capital goods and financial reserves into
the production of war materials and the wholesale destruction of
wealth had been enormous. The total number of deaths for all
belligerents has been estimated at around 28.5 million. An entire
generation of young men was decimated; and, in the process the
fighting had "cost $180.5 billion directly and $151.6 billion
indirectly."[4] For Germany and Austria-Hungary, as well as
for France and Britain, the good will of Woodrow Wilson and the people
of the United States was crucial to a rapid recovery -- at least that
was the opinion of economist John Maynard Keynes:
Europe was in complete dependence on the food supplies
of the United States; and financially she was even more absolutely
at their mercy. Europe not only already owed the United States more
than she could pay; but only a large measure of further assistance
could save her from starvation and bankruptcy. Never had a
philosopher held such weapons wherewith to bind the princes of this
world.[5]
Keynes was one of only a small group eager to put their trust in the
philosopher Wilson to bring about a peace they hoped would be
permanent in nature. Keynes hoped an international coalition of
liberals, progressives and moderate socialists could prevent a
dictated peace that would leave Europe in a state of chaos, divided
politically and in unresolved conflict over the control of economic
resources. Under the circumstances, only Wilson's leadership offered a
modicum of hope that moderation would prevail. What Keynes and others
of similar mind feared was the frustration mounting within populations
tired of waiting for politicians to punish those who had embraced the
gods of war and had lost. What even Keynes missed, of course, was the
real key to making the future safe for social democracy (and, lead,
incidentally, toward a state of cooperative individualism);
namely, the adoption of measures that would end the concentrated
control over locations and natural resources and thereby achieve a
much greater degree of equality of opportunity. For whatever reason,
Keynes did not give proper weight to the fact that the Junkers
remained as a powerful class in Germany, as did their counterparts in
France and Britain. And, in neither country did these wealthy
controllers of the land contribute to the war effort in proportion to
the privileges they enjoyed. Britain, alone among the major powers,
had relied more on taxation than on borrowing to raise revenue. Yet,
Britain's leaders predictably chose to tax production and commerce
rather than privilege. Despite this, Keynes was quick to chastise the
French and Italians for their failure to pay for the war expenditures
with taxation rather than debt. Germany, of course, had made the same
mistake. "In Russia, Poland, Hungary, or Austria," added
Keynes, "such a thing as a budget cannot be seriously considered
to exist at all."[6] The question now before these
governments was how to raise the revenue to provide for public
services and how to once again stimulate wealth production.
Winston Churchill, surveying the new world disorder arising out of
the ashes of warfare, reflected on the magnitude of the destruction to
long-standing socio-political arrangements and institutions:
The conditions were outside all previous experience. At
the outbreak with all its unknown and measureless possibilities the
flood of crisis flowed along channels which for some distance had
already been prepared. ...The immense forces of destruction, long
gathered and stored, were released. ...
The men at the head of the victorious states were subjected to
tests of the most trying kind. They seemed all-powerful: but their
power was departing. ...With every day's delay it became more
difficult to gather the fruits of victory. With every day the power
not only of statesmen, but of the Allied nations themselves, and
their unity, must decline, their armies must come home; their
electorates must regain their sway. Jealousies, factions, revenges
long pent up now advanced on every side. Yet every day was so full
of important and urgent business, and so disturbed by jostling
personalities and events, that human nature could not cope with the
task.[7]
Churchill could speak first hand of Britain, where the war had
derailed efforts by the radical Liberals to move at least part of the
way toward ending land monopoly and the privileges attached to private
land ownership. The dwindling remnant of radical Liberals who believed
in the cause brought to Britain by Henry George and financed to a
great extent by Joseph Fels were unable to fight off a Conservative
effort to repeal the limited taxation of land values contained in the
Finance Act of 1910. During the war, even Philip Snowden, the most
powerful supporter of Henry George's proposals within the Liberal
camp, abandoned the quest to end land monopoly and settled for a
semblance of progressivity in taxation. After the war, the political
climate facing Lloyd George upon his re-election in 1919 was
altogether different. He journeyed to Versailles with a clear mandate
to negotiate a peace settlement that would preserve and even expand
the British empire, while putting Britain's financial house in order
at Germany's expense, rather than looking to Britain's agrarian, urban
and industrial landlords to compensate society for the privileges
enjoyed.
From the very beginning of the negotiations, the French and British
considered Wilson's Fourteen Points to be superfluous. Neither of
these two Allies had ever agreed to the terms stipulated by Wilson.
Wilson, for this part, did hold one important trump card -- the
willingness of the United States to provide additional credit to
Britain and France and to consider canceling some of the war debt. The
U.S. President never played this card. He had no intention of
resorting to economic blackmail or taking positions clearly against
his moral sense of right and wrong.
As far as the French and British were concerned, the final version of
the treaty would be delivered to the Germans, Austrians, Hungarians
and Bulgarians as a fait accompli over which there would be no
negotiation. The only questions to be resolved were how specific or
how general they were going to be in the terms. They demanded a new
balance of power that would permanently reduce Germany to a nation of
regional rather than continental importance. Austria and Hungary were
to be separated and their imperial territories taken from them. New
sovereign nations were to be forged out of diverse peoples and given
the names Czechoslovakia and Yugoslavia. Under the treaty, Rumania
gained new territory at the expense of Hungary, and Italy was enlarged
at the expense of Austria. Both Poland and Czechoslovakia gained
territory occupied by German-speaking inhabitants whose loyalty to
their new governments could never be counted on.
As a result of all these boundary changes and the disruptions in
government and commerce, armed conflict spread throughout the former
Austria-Hungarian empire. The Balkans, in particular, became charged
with the explosiveness of ethnic nationalism that continues to plague
the region to this day. Matters were made worse by the civil war
raging in Russia, where Trotsky's Red Army battled the Allied
Powers-supported anti-Bolshevik forces. A window of opportunity opened
for nationalists in Finland, Estonia, Lithuania, Latvia and the
Ukraine to declare their independence from Russia. War also erupted
between the Poles and Hungarians, as well as the Czechs and
Hungarians. Rumanians fought against Serbs, Croatians and Hungarians.
The victorious allies could do virtually nothing to restore order.
Germany, too, was also fast becoming an armed camp where chaos and
terrorism reigned.
As early as mid-1916, the German socialists had split over the aims
of the war. The Marxist-dominated faction formed the Independent
Social Democratic Party and pushed for an end to the war. An inner
faction of even more radical Marxists pressed for nothing short of
overthrowing the government. By the time Ludendorff relinquished power
to the Reichstag, any hope for a peaceful transition from de facto
military dictatorship to parliamentary rule had become illusory. Some
constitutional reforms were adopted by the Reichstag, and Wilhelm II
quietly abdicated. Germany was briefly to be governed by the
socialists under Friedrich Ebert and Philipp Scheidemann. The
situation they faced was desperate and rapidly deteriorating as
hunger, inflation and mass unemployment took hold. Rebellion erupted
in Munich on November 7 and workers began demonstrating in Berlin two
days later. Ebert became extremely fearful of what the radical
Marxists, directed by Karl Liebknecht and Rosa Luxemburg, might do.
When workers in Berlin filled the streets and established control over
parts of the city, Ebert called on the Army to restore order.
Thousands of workers were massacred during what amounted to a
full-scale military assault. Liebnecht and Luxemburg were arrested,
then murdered. With order restored and his most immediate competition
eliminated, Ebert called for a national assembly to convene in Weimar.
The remaining radical Marxists broke with other socialists to form the
German Communist Party, while Ebert abandoned most of the socialist
program in exchange for support from moderates and nationalists. A new
constitution created a federal republic and Ebert was elected
president.
One of Ebert's most serious internal challenges then came from
Bavaria, where a new government headed by Kurt Eisner announced that
Bavaria was breaking with the rest of Germany and seeking a separate
peace with the Allies. Then, in late February of 1919, Eisner was
assassinated by an aristocratic nationalist. Violence erupted and the
communists seized power. Some thirty thousand paramilitary, members of
the so-called Freikorps marched into Munich and put down the
rebellion. What many Germans were beginning to sense was that the
restoration of order would be only temporary:
The Freikorps left behind a city seething with
anger and a lust for vengeance in every street and alley -- the
hatred of socialists for the Freikorps, of Communists for
monarchists, of royalists for Jews, of anarchists for
industrialists, of nationalists for anarchists.[8]
From their first days in office, the leaders of the new Weimar
Republic faced intense opposition. The Junkers and other conservative
nationalists came together to form the National People's Party, whose
primary reason for being was to gain power and destroy the Republic.
For the time being they were willing to live marginally within the
confines of established order, always looking for opportunities to "[take]
advantage of parliamentary institutions to undermine them."[9]
In Paris, the German representatives at the peace conference pleaded
the desperate condition of the nation and warned of a Bolshevik
takeover. Even more pressing, they advised the Allies, a severe food
shortage threatened the population with widespread starvation.
Everyone knew that only the United States was in a position to relieve
the widespread misery of the European people. Wilson now drew the line
and demanded the Allies provide relief. Clemenceau initially resisted
helping the Germans, but in this instance Lloyd George supported
Wilson, although the price to Germany was set quite high. Food was to
be transported in German ships (turned over to Britain), and payment
was to be made in gold. Ironically, Germany's only means of meeting
reparations would now be with exports.
The final treaty was presented to the German representatives on May 7
at Versailles. Once translated into German, the treaty was sent to
Berlin and announced to a disillusioned and angry public. Under the
treaty, Germany was to be disarmed and left virtually emasculated by
reparations. Many Germans demanded a refutation of the treaty and of
Germany's responsibility for starting the war. Paul von Hindenburg,
Germany's aged Field Marshal, advised Friedrich Ebert that the army
could no longer resist an Allied assault in the West. The entire
German navy, submarines included, had already surrendered to the
British, and a blockade would bring about a total collapse of Germany.
Convinced that the passage of a few years would lessen the Allied will
for enforcement, and faced with no rational alternative, the Germans
agreed to the terms and signed the treaty on June 28, 1919.
AND IN THE UNITED STATES
A Turn to Isolation and the Rise of Nationalism
Based on reports received from Europe months before the final treaty
was ready, Walter Lippmann informed his
New Republic readers that Wilson's Fourteen Points would be
abandoned, that the treaty terms were excessively punitive and were
certain to set the stage for a future conflict. When the final treaty
was made public in the United States, the editors of the New
Republic united in their opposition to its adoption. "Looked
at from the purely American point of view, on a cold calculation of
probabilities," they charged, "we do not see how
this treaty is anything but the prelude to quarrels in a deeply
divided and hideously embittered Europe."[10] The U.S.
Secretary of State, Robert Lansing, admitted as much in his private
and public statements. And so, many Republicans and at least some
Democrats declared their opposition to the treaty, with Wisconsin's
unconventional Senator, Robert M. LaFollette, taking the opportunity
to engage the President in debate:
The little group of men who sat ... at Versailles were
not peacemakers. They were war makers. They cut and slashed the map
of the Old World. ...They locked the chains on the subject peoples
of Ireland, Egypt, and India. ...Then, fearing the wrath of outraged
peoples, ... they made a league of nations to stand guard over the
swag![11]
Such reactions to the treaty terms angered rather than disheartened
Wilson. He had compromised so much already, so he was in no mood to
have to explain this to his own countrymen. He expected, even
demanded, their support; yet he failed to provide the leadership
around which a consensus could be forged. In the end, he had to face a
U.S. Senate controlled by Republicans whose leader, Henry Cabot Lodge,
opposed the League of Nations on the grounds that membership
threatened U.S. sovereignty. Lodge and other nationalists drafted a
long list of reservations to be appended to the treaty, in response to
which Wilson became even more adamant that the treaty should stand as
presented. Despite the counsel of leading Democrats that compromise
was needed, Wilson's deteriorating physical condition and mental
stresses now clearly affected his judgment. He could not be dissuaded
from advocating a path along which political suicide was an absolute
certainty.
Key advisers and others close to the President understood that
Wilson's capacity to govern was now in serious question. His focus
remained almost entirely on the treaty and the League of Nations,
while the public was increasingly absorbed by problems affecting daily
life - the rise in prices of goods and growing unemployment. As
defense contracts expired and government spending fell, companies
released some workers and reduced the wages of others. In retaliation,
workers walked off their jobs all across the country. Despite the
urgings of Assistant Secretary of Labor Louis F. Post, the national
government simply left the corporations (i.e., the industrial
landlords) to resolve their labor problems in whatever manner they saw
fit. Business owners enlisted the assistance of the Immigration Bureau
in a campaign to instill fear in workers who were not yet citizens.
Aliens who were in any way affiliated with radical organizations were
targeted for round-up, denied Constitutional protections and held for
eventual deportation. Wilson seemed to be, and may very well have
been, oblivious to these events.
In September of 1919 the President took his campaign in support of
the League of Nations directly to the people, speaking to crowds in
city after city all across the country. The strain of so many speeches
and the travel by train exacted a heavy price on Wilson's health, and
late in September he returned to the capital for treatment and
recuperation. On October 2 he experienced a massive stroke. "What
remained," concludes John M. Blum, "was not Woodrow
Wilson but a shell and travesty of him."[12] Even more
tragically for the people of the United States, he remained in the
Presidency -- debilitated, isolated by a protective wife, and unable
to see clearly what was happening around him. Whatever political
constituency he had enjoyed now disappeared. The treaty could not be
passed as written or even with Republican reservations added.
Remarkably, Wilson briefly thought of running for a third term as a
test for the treaty, a possibility not given serious consideration by
a Democratic party anxious to return the nation's attentions to
domestic affairs. The country had, indeed, tired of Wilsonian
internationalism. The Republican reaction was to settle on a moderate
Senator from Ohio, Warren G. Harding, as their candidate in 1920, and
Harding easily defeated the Democratic nominee, Governor James M. Cox
of Ohio. The problem of formalizing the peace now rested with a
Republican administration firmly in control of the U.S. Senate.
Harding's response to the nation's problems was, first, to call for a
special session of the Congress where he announced his
administration's intention to keep the U.S. out of the League of
Nations and to simply repeal the nation's declaration of war against
Germany and Austria-Hungary. In the months that followed, Harding sent
representatives to participate in the post-Versailles reparations
meetings and invited Britain and Japan to a conference on naval
disarmament. On July 2, 1921 he signed the resolution formally ending
the war with Germany.
In addition to the treaty, Harding faced a number of serious economic
challenges associated with the war. Despite the fact that the United
States had become the world's great exporting nation, the nation's
Federal debt had climbed from $1 billion in 1914 to over $24 billion
in 1920. Because both prices and incomes had also increased
dramatically during the war years, Federal Reserve officials decided
to orchestrate a contraction of the supply of credit in an effort to
tame rising prices for goods and services. At this stage of economic
management, monetary tools were the main ones looked to by most
mainstream economists to mitigate the broad swings of the business
cycle. By requiring banks to hold more cash in reserve and by
increasing the rate of interest charged to banks for borrowing from
the Federal Reserve, the anticipated result was a moderate cooling of
the demand side pressure on prices. War had stimulated a full
employment economy fueled to a great extent by government borrowing.
Now, falling government purchases were not quickly replaced by
business and consumer spending. Once again the agrarian and industrial
landlords, faced with falling demand and disappearing profits,
pressured Harding and the U.S. Congress to adopt policies that
combined laissez-faire and protectionism -- socialism for the
producer and unbridled individualism for the consumer. The Republicans
and almost all the university-trained economists accepted these
policies as the right and appropriate steps to take. The longer-term
consequences of taking this path would be felt as the decade unfolded.
The dynamic circumstances that brought the nations of the Old and New
Worlds together as either allies or adversaries in war did not resolve
the deeply-rooted socio-political differences separating them. With
the rapid development of communications systems and air travel,
resolution of these differences could not long be avoided. Otherwise,
future disagreements were sure to result in a renewal of armed
conflict. Such concerns were widely voiced by thoughtful individuals
in many countries. H.G. Wells, for example, wrote in 1922 that there
were both systemic and cultural forces working against the ascendance
of universal values. Although the United States was in the midst of a
great experiment in pluralism, the majority (those of northern
European heritage and holding to the Protestant faith) somehow thought
that the society emerging would be homogeneous although uniquely American
in its culture. A diverse and growing percentage of the population
remained outside the mainstream, but even Wells simply ignored their
existence:
[T]here was in the generation of people in the United
States to whom this great occasion came, a generation born in
security, reared in plenty and, so far as issues that had made
Europe grave, a certain superficiality and lightness of mind. It was
not that the American people were superficial by nature and
necessity, but that they had never been deeply stirred by the idea
of a human community larger than their own. It was an intellectual
but not a moral conviction, with them. One had on the one hand these
new people of the new world, with their new ideas, their finer and
better ideas, of peace and world righteousness, and on the other the
old, bitter, deeply entangled peoples of the Great Power system; and
the former were crude and rather childish in their immense
inexperience, and the latter were seasoned and bitter and
intricate.[13]
Even with these limitations and enormous obstacles in the way, the
hope of the transnationals for a different kind of world rested more
than ever on the emergence of the United States as a permanent,
progressive advocate of social democracy. The United States could no
longer realistically retreat from center stage and hope to remain
unaffected by Old World events. While on a lecture tour in the U.S.
during 1921, Albert Einstein warned the people of the United States to
resist the temptation of thinking they could ever again extricate
themselves from the socio-political world beyond their borders. "The
world, if it is to progress toward a brighter and nobler future,
needs, as never before, the help of those great nations and men who
are internationally minded,"[14] Einstein declared. "Without
the active co-operation of the greatest country, the United States,"
he continued, "all efforts toward a sane organization of
international relations are bound to remain ineffectual."
[15] Only a small minority shared Einstein's views or heeded his
warnings.
Harding's election was one indication that at least a majority in the
U.S. had reached the limit of their tolerance for military adventurism
in the Old World. When Republicans proposed holding an international
conference on naval disarmament, Oswald Garrison Villard wrote in The
Nation that Harding could "associate his name forever
gloriously with greater service to all the world than has ever been
achieved by any other modern ruler."[16] Albert Jay Nock was
not so sure; he responded in The Freeman that Villard ought to
know from history that the victorious nations would not be denied
their spoils and their moment in the sun as unchallenged military
powers. As for the United States itself, Republicans were no less
committed to enforcing the Monroe Doctrine than Democrats. All agreed
that a strong naval force was essential to the defense of U.S.
territories -- and interests. Disarmament would, therefore, require
the oversight of an independent and militarily strong League of
Nations. Neither Britain, Japan nor the United States -- the world's
three main naval powers -- responded with much enthusiasm to the
possibility of relying on an international body to protect their
sovereignty. Equally important to the course of events, the people of
the United States, in particular, were looking inwardly, anxious to
get on with their lives and the improvement of their own society. For
these Americans the war had merely interrupted the steady
march of reform. The time had come to complete the promise of the
Progressive agenda.
Legislation and regulation had already managed to moderate some of
the harshness out of American landlordism but failed to remove
the fundamental causes. As a consequence, and absent a continuation of
heavy government spending, the post-war economy could not absorb
returned soldiers or those migrating from rural landlessness to urban
poverty. Millions more were trapped in a cycle of poverty that kept
them working long hours at subsistence wages in mines and sweatshops,
often kept perpetually in debt to their employers. Technological
changes and mass production methods were relegating an even larger
portion of the working population to jobs that demanded fewer skills
and commanded even lower wages. Thus, despite a rapid expansion in
productive capacity, there were just not enough households in the
country with high enough incomes to maintain an equilibrium between
production and consumption. Once the pent up demand created by the war
subsided, the nation's producers were faced with the problem of excess
capacity. In the policy arena, neither the politicians nor the new
generation of professional economists grasped the full nature or
eventual consequences of the debt-financed expansion that kept the
global economy functioning. Virtually all producers - agricultural and
industrial -- now clamored for protection from competition.
Perhaps no contemporary observer with a pubic audience expressed
greater cynicism concerning the quality of those who held public
office or aspired to lead the nation than H. L. Mencken, who suggested
to his readers that "[w]hatever the label on the parties, or
the war cries issuing from the demagogues who lead them, the practical
choice is between the plutocracy on the one side and a rabble of
preposterous impossibilists on the other."[17] That a crisis
in leadership existed was a broadly accepted fact. Nonetheless,
implementation of fundamental reforms to the nation's socio-political
arrangements and institutions were not being proposed within the
mainstream political arena.
In the United States, the decade of the 1920s became a time of
retrenchment and considerable self-delusion. Conventional wisdom held
that would be well if only government protected domestic producers
from imports. At the same time, domestic demand in Europe had not yet
recovered, so European producers had to penetrate foreign markets in
order to survive. As fragile as the global economy was, the United
States was one of the few countries that could afford to import more
than its producers exported without causing a serious drain on its
gold reserves. With the war over, Harding advisers urged a program of
economy in government, a balanced budget and retirement of the
national debt - seemingly sound objectives for the United States that
only added to the stresses of the larger global economy. Not
unexpectedly, Harding made no moves to resurrect the Progressive era's
attack privilege or remove barriers to trade. Henry George's lingering
influence within the political arena essentially disappeared.
Harding's Secretary of the Treasury, Andrew Mellon, represented the
interests of the nation's wealthiest citizens. On their behalf he
orchestrated an enormous tax cut with the promise that the wealthy
would invest in job-creation. As Henry George would have predicted,
the wealthy simply invested these funds in the stock and bond markets
and in land. Another member of Harding's cabinet, Secretary of the
Interior Albert B. Fall, implemented policies to turn over the public
domain to private interests for unencumbered exploitation with almost
no compensation to society for the privileges extended.
As if the above measures were not sufficient evidence of a blind
obedience to the philosophy monopolistic privilege, Secretary of
Commerce Herbert Hoover applied his organizational talents to the
promotion of a protectionist-based export economy, one result of which
was that late in 1922 the Senate passed the Fordney-McCumber Tariff
Act. The tariff was neither the foundation nor even the catalyst for
disintegration of the global economy. Yet, that such a highly
protectionist policy was adopted at this crucial time reveals just how
futile were the efforts of cooperative individualists in their
struggle to adopt either economic or political reforms.
Harding's death in 1923 changed little. The nation's socio-political
agenda was slowly and grudgingly beginning to accommodate the complex
interests of those who fought to maintain the status quo. Most
Progressives held firm to their beliefs and waited, putting faith in
the democratic process to achieve incremental change. From the first,
of course, the society emerging after achieving independence from
British rule consistently subordinated principle to expediency and
deal-making. Thankfully, these tendencies did not go unchallenged.
Along the way, the system's safeguards against corruption were
periodically strengthened (or weakened) in response to the public
disclosure of crimes committed by public officials in league with
monopolists and other scoundrels. Every new administration offered the
promise of a new beginning; yet, the republic suffered from its
numerous institutional weaknesses, serving privilege rather than the
citizenry as a whole.
After Wilson, Harding had been, at least initially, a breath of fresh
air for many people looking for a return to normalcy and a President
who held similar values. For those who looked to the future and to the
ascendancy of the United States on the global stage, the Republican
administration interrupted what they viewed as inevitable and
necessary. Upon the news that Harding had died, Walter Lippmann wrote
to Felix Frankfurter: "Harding is dead and Coolidge is
President of the United States. That's woe enough for the gloomiest."[18]
The more thoughtful judgment, I suggest, is that Progressivism and
Internationalism coexisted under Roosevelt and Wilson. Under Coolidge,
the impetus for progressive reforms virtually disappeared. Illusory
competitive markets rather than government regulation was relied upon
to curb the excesses of the nation's rent-seeking landlords. The
inevitable result was reflected on, in almost matter-of-fact fashion,
by Arthur M. Schlesinger, Jr. in his history of the period:
By 1930 the two hundred largest nonbanking corporations,
after growing during the decade at a rate two to three times as fast
as the smaller nonbanking corporations, controlled about half the
total corporate wealth of the country.[19]
Schlesinger's analysis of the problems caused by contradictory and
inept government intervention, on the one hand, and laissez-faire
protections of privilege on the other are insightful, if incomplete.
He does not make the connection, for example, between the diversion of
billions of surplus dollars gained from investment in the
production of wealth into speculative investments in locations,
natural resource-laden lands and the stock market. Nor does he venture
into the area of inherited fortunes examined in great detail by
writers such as Ferdinand Lundberg in his 1968 book The Rich and
the Super Rich. Lundberg's research indicated that with only a
handful of exceptions, "[n]early all the current large
incomes
are derived in fact from old property accumulations, by
inheritors - that is, by people who never did whatever one is required
to do, approved or disapproved, creative or non-creative, in order to
assemble a fortune."[20] Schlesinger could have gained
significant insight by a reading of economist Harry Gunnison Brown's
Economic Science and the Common Welfare, published in 1925. In
this book, Brown forecasted dire consequences for the United States
and all nations unless drastic corrective steps were taken without
delay, a message delivered, it must be said, with more than a touch of
cynicism. "Democracies do not always -- perhaps do not
generally -- follow the path of wisdom even when this path is pointed
out by its trained citizens," began Brown. "And
those whose training should enable them to indicate the lines of wise
policy are not always, themselves, sufficiently free from bias in
matters involving conflicting class interests to make them safe guides."[21]
Brown's unique insight was that the United States and the other major
industrialized societies were, like it or not, bound together. He
stressed the need for "some form of agreement, by treaty or
otherwise, binding the central banking institutions of the five or six
principal industrial and commercial countries to a more or less common
policy"[22] that would prevent dramatic shifts in relative
prices or the supplies of gold, currency and credit. He also proposed
a shift from the gold standard to a commodities-based system "redeemable,
continuously or at short intervals, in that amount of gold which would
purchase a definite total of commodities-in-general."[23]
Gold would, under these circumstances, become less of an object for
hoarding and more readily available as a mechanism for stabilizing
prices. An appreciation of what these controls would accomplish
requires some expansion. In the following passage, Brown suggests how
markets would function under this regime:
To illustrate, suppose a dollar to be, at the start, the
equivalent of 25 grains of gold, and suppose that the United States
Treasury would sell dollars for gold at that price, or gold for
dollars. Suppose, further, that prices rise by (say) 1 per cent. If,
then, the legal value of the dollar is changed to 25.25 grains, the
rise of prices will tend to be, wholly or in part, corrected. The
dollar is thereafter worth, when redeemed, 1 per cent more in gold
than before. Holders of dollars would present them for redemption in
gold until dollars were so scarce as to be worth as much as the
25.25 grains of gold in which they were being redeemed. If,
nevertheless, prices continued to rise, the dollars could be made
redeemable in larger and larger amounts of gold until finally the
rise was stopped and prices were restored to their former level.[24]
Stabilization of prices also required that something be done to
remove the protective walls being constructed to keep out foreign
goods. "It should, indeed, be obvious to any reasonable
person that other countries can not buy American goods if these goods
may not be paid for in what the buying countries can produce,"[25]
Brown warned. Protectionists tried to somehow argue that the citizens
of a country benefited by sending to those of other countries goods of
greater value than what they received in exchange. In the lexicon of
the economist, this was supposed to represent a favorable balance of
trade. In our own time, economists Milton and Rose Friedman expended
considerable energy (with some degree of success) to show the fallacy
of this thinking. "Exports are the price we pay to get
imports," they write. "[T]he citizens of a nation
benefit from getting as large a volume of imports as possible in
return for its exports, or equivalently, from exporting as little as
possible to pay for its imports."[26] Because tariffs have
the exact opposite effect, they "can not possibly increase
demand for labor, and, therefore, employment," Brown argued. "If
it increases employment in some industries, it decreases employment in
other industries." And, at the end of his book Harry Gunnison
Brown addressed society's failure to collect the annual rental value
of locations and natural resource-laden lands from those in
possession. As had Henry George and so many others over the previous
forty-five years, Harry Gunnison Brown championed the cause of the
Single Tax:
To sum up, the change here discussed would remove heavy
tax burdens some of which rest in large degree on wages; it would
add to the net returns on capital; it would discourage speculative
holding of land; it would make more easy the acquiring of land for
production or for homes and so would facilitate the change from
tenancy to ownership. Those who were ambitious to get farms and
homes for themselves would have larger (because untaxed or less
taxed) earned incomes to buy with, and they would not have to pay in
advance, in a high price of land, the capitalized value of
exploitation, ...
...Under our present system of taxation we tax the earned incomes
-- interest and wages -- of farmers, manufacturers, laborers and all
other persons. We diminish the profitableness of making improvements
in soil and drainage, of erecting buildings, of planting orchards,
of accumulating machinery and stock. But we tax land rents so
lightly as to leave land values, i.e., capitalized prospective
rents, high, and so make it seem easy and relatively worth while for
discouraged users of land whose labor and interest incomes are
highly taxed, to sell their land and live out their money. In brief,
our policy of taxation gives almost the maximum encouragement to
speculation in land, keeps the price of land high and so makes it
hard to acquire except by the wealthy few, keeps earned incomes
derived from the use of land relatively low and tempts users of
land to sell. ...[28]
As Brown forecasted, a feeding frenzy of land speculation hit the
United States -- in the same year that his book was published. Florida
land was heavily promoted in the northern cities, attracting tens of
thousands of migrants and triggering a wave of speculation that drove
land prices up from a few dollars to thousands of dollars for a mere
building lot. So much activity was generated that rights to
nonexistent lots sold based only on a developer's blueprint. Purchase
binders were sold, sold again and resold at enormous profits long
before any infrastructure development was ever completed. Access to
water, sewer, electricity, even roads, was typically projected for
completion well into the future. Then, in the Fall of 1926 two massive
hurricanes struck Florida, ending the boom and leaving destroyed
communities, failed banks and bankrupt speculators behind.
All across the agricultural heartland of the United States a similar,
though less dramatic, cycle of speculation in farmland had erupted
during the boom years of the First World War. Then, with the return of
peace and foreign production, falling commodity prices pulled land
prices down as well. Farmers who had acquired additional acreage -- on
credit and at inflated prices -- now faced default and the loss of
some or all of their holdings. Numerous banks in the agricultural
regions were hit with large loan defaults. Many failed. For the
bankers as well as the farmers, prosperity was fleeting and illusory.
No one at or near the center of power seemed to have any idea that the
cycle of speculation was largely a function of socio-political
arrangements in the form of seriously flawed tax policies. While
economists continued to base their support for free trade on
theoretical postulates, as a group they had little to say about the
consequences of taxation levied against production and commerce versus
the static activity of holding title to land. Even had they been more
outspoken, however, the fact remained that powerful vested interests
used their financial resources and persuasiveness to maintain
protectionist walls and monopoly privileges. As one economist, Fabian
Franklin, wrote in frustration, "a protective duty, once
established, has rarely been got rid of altogether."[29]
Other forms of privilege and subsidy have the same sort of entrenched
existence once introduced.
Republicans when in power tended to legislate higher tariffs.
Democrats tended to reduce the tariffs. The policy decisions were
never about principle; rather, they were about who would be protected
and to what degree. Harry Gunnison Brown and a small number of other
economists offered warnings of what was to come but they were largely
ignored. They knew that even free trade was not enough by itself to
ward off the expansion-speculation-crash-recession cycle. Brown kept
writing that although free trade was essential as a key ingredient to
stability, even free trade would be globally effective only in
conjunction with the collection of the annual rental value of
locations and natural resource-laden lands. Maximum benefit would then
require removal of taxation from wealth production and commerce.
One rather interesting insight into the rationale for laissez-faire
protectionism appeared in the form of a biography of Herbert Hoover
during the year of his campaign for the Presidency. As Secretary of
Commerce, Hoover had turned his department into a central nervous
system for U.S. companies producing for foreign markets. His approach
to trade was purely pragmatic, and he was quick to recognize the
strengths and weaknesses of U.S. producers. "Where we lead
the world is in moderate-priced goods turned out in enormous
quantities by machine methods," declared Hoover. "If
we keep on delivering an honest product ... foreigners will realize
finally that our goods, in spite of their unfamiliarity, are better
and cheaper."[30] Prosperity, he believed, was directly
linked to the expansion of exports, to intensive investment in capital
goods, to competitive markets and to living wages paid to workers.
And, if foreigners did not have the financial reserves to purchase
U.S. made capital and consumer goods, such purchases ought to be
financed by the U.S. This was, after all, good for all parties
involved:
Before the war, Great Britain financed the world. Through
circumstances not of our creation, we have succeeded to that office.
Ahead of our exports has run a flood of American dollars. This
creative capital, by raising the productiveness of foreign peoples,
increases their purchasing power; there follow more sales for our
business men, more employment for our workers. Except in a few
instances where such loans were against the interest of the American
people, Hoover has steadily encouraged this movement. ...
So much for export trade. But, as Hoover himself has said, American
prosperity can in many ways be measured by the volume of imports. We
export agricultural products and manufactured goods; we import raw
materials. If the inflow of such commodities as rubber or sisal or
platinum be clogged or restricted, American industry suffers. During
Hoover's term with the department it has fought and won its notable
battles to protect the consumer of imports. For in half a dozen
products necessary to our industry or our national life, foreign
Governments or commercial combinations have tried to establish
monopolies of one form or another, and to make American consumers pay
the price.[31]
Hoover, the engineer, viewed the world as an enormous machine, the
parts of which malfunctioned because of the absence of universal
standards and sound management. Although he took equality of
opportunity and essential justice under the republic for granted, he
recognized there were enormous inefficiencies in need of remedy. His
approach to mitigating the business cycle, for example, was to
establish a committee of key individuals from industry, labor, the
Commerce Department and the economics profession to come up with an
early intervention plan that would kill inflation at its earliest
signs. Hoover was convinced that if inflation could be removed from
the economic equation prices would operate, as theory suggested, to
clear markets, maintaining the equilibrium between supply and demand.
The committee's solution was largely that of a properly timed
tightening of credit, enough to bring speculative investment activity
under control but not enough to threaten the growth in production and
consumption. This might sound like managing the economy but there was
no thought of a Keynesian use of deficit spending by government to
prime the pump during times of recession. By Hoover's measure,
any need to even contemplate such an action was removed with the
control of inflation at the expansion phase of the business cycle. By
preventing speculative activity, there would be no crash and,
therefore, no recession.
There was much that Hoover and his teams of experts did not
understand about the system of wealth production and distribution.
Collective ignorance, pushed and pulled by aggregate vested interest,
prevented the adoption of sound public policies. To the extent any
society came under the influence of the engineers and the professional
economists, the managed economy evolved mismanaged. Politics assured
the process followed a path of disjointed incrementalism. Conventional
wisdom dictated the thinking of almost all political leaders and their
advisors, few of whom thought of the market as potentially a win/win
environment. National wealth was preserved and an improving standard
of living was to be achieved not by guaranteeing equality of
opportunity and a just distribution of wealth but by a positive
balance of trade and the accumulation of gold bullion in the vaults of
the central bank and treasury. Much of this thinking has remained. In
1967, for example, the British historian W.N. Medlicott wrote with
absolute confidence in the conventional wisdom, that "[u]nemployment,
the root cause of individual unrest and symbol of the unsolved
problems, was due primarily to the failure to maintain the prewar
level of exports."[32] No doubt, absent the domestic
purchasing power of a high wage, full employment society, Britain (and
all societies with similar structural flaws) required expanding
overseas markets to absorb production. Ultimately, however, all
accounts must be settled by the exchange of goods or some type of
asset. Foreigners who hold a nation's currency but have no interest in
the purchase of goods from that nation have a limited number of
options. One that has always been pursued is investment in the land
markets, where returns can be enormous if the investor senses
correctly how long to stay in and when the time is nearing when
producers can no longer absorb higher land costs and stay in business.
AND ACROSS THE ATLANTIC
The Old World Competes for Hegemony
One More Time
Economists have tended to emphasize decisions affecting the supply of
currency and credit as crucial to the decline in Britain's exports.
Harold Van B. Cleveland presented a more balanced view, but one that
also ignores the structural problems created by Britain's systems of
land tenure and taxation:
[A]ll through the decade of the 1920s, the Bank of England hewed to a
restrictive line. The Bank's domestic assets regularly declined, as
the British monetary base, while the money supply also fell gradually
until 1925 and thereafter increased very slowly. The policy probably
accounts for the prolonged recession and for much of the unemployment,
although the depressed condition of major export industries -- coal,
textiles, steel, and shipbuilding -- due to increased foreign
competition after the war, along with the unwillingness of labor to
move out of the coal and textile areas, undoubtedly accounts for some
of the unemployment.[33]
The war had certainly disrupted trade relations between all peoples
around the globe. To his credit, Hoover was one of a few statesmen to
understand that recovery could only occur on the basis of renewed
production and not by transferring existing wealth from the defeated
nations. Of the few economists who possessed international prestige,
John Maynard Keynes was the most vocal in concurring with Hoover's
assessment of the Eurasian crisis. Keynes did not, however, recognize
the extent to which the societal objective of
full employment without inflation,/i> depended on a purging of
monopolistic privileges. He accepted without serious investigation the
conventionally-held wisdom that stable economic growth could be
sustained by the adoption of a rules-based approach to market
intervention. As did Hoover, Keynes expressed his grave concern that
economic recovery was the necessary agent for socio-political
stability:
The essential facts of the situation, as I see them, are
expressed simply. Europe consists of the densest aggregation of
population in the history of the world. This population is
accustomed to a relatively high standard of life, in which, even
now, some sections of it anticipate improvement rather than
deterioration. In relation to other continents Europe is not
self-sufficient; in particular it cannot feed itself. Internally the
population is not evenly distributed, but much of it is crowded
into a relatively small number of dense industrial centres. This
population secured for itself a livelihood before the War, without
much margin of surplus, by means of a delicate and immensely
complicated organisation, of which the foundations were supported by
coal, iron, transport, and an unbroken supply of imported food and
raw materials from other continents. By the destruction of this
organisation and the interruption of the stream of supplies, a part
of this population is deprived of its means of livelihood.
Emigration is not open to the redundant surplus. For it would take
years to transport them overseas, even, which is not the case, if
countries could be found which were ready to receive them. The
danger confronting us, therefore, is the rapid depression of the
standard of life of the European populations to a point which will
mean actual starvation for some ...
The significant features of the immediate situation can be grouped
under three heads: first, the absolute falling-off, for the time
being, in Europe's internal productivity; second, the breakdown of
transport and exchange by means of which its products could be
conveyed where they were most wanted; and third, the inability of
Europe to purchase its usual supplies from overseas. ...
What then is our picture of Europe? A country population able to
support life on the fruits of its own agricultural production but
without the accustomed surplus for the towns, and also (as a result
of the lack of imported materials and so of variety and amount in
the saleable manufactures of the towns) without the usual incentives
to market food in return for other wares; an industrial population
unable to keep its strength for lack of food, unable to earn a
livelihood for lack of materials, and so unable to make good by
imports from abroad the failure of productivity at home. ...[34]
As Keynes understood the global economic system, government
intervention had almost always been inept and counterproductive. That
this observation was true is well-supported by history, but not
primarily for the reasons he thought:
By a continuing process of inflation, governments can
confiscate, secretly and unobserved, an important part of the wealth
of their citizens. By this method they not only confiscate, but they
confiscate arbitrarily; and, while the process impoverishes
many, it actually enriches some. ...As the inflation proceeds and
the real value of the currency fluctuates wildly from month to
month, all permanent relations between debtors and creditors, which
form the ultimate foundation of capitalism, become so utterly
disordered as to be almost meaningless; and the process of
wealth-getting degenerates into a gamble and a lottery. ...
The inflationism of the currency systems of Europe has proceeded to
extraordinary lengths. The various belligerent Governments, unable
or too timid or too short-sighted to secure from loans or taxes the
resources they required, have printed notes for the balance. ...[35]
This power of government to self-create credit by either printing
currency directly to exchanging government securities for central bank
notes is an important part of the story. What Keynes means by securing
loans is that rather than tax the wealthy (or, more specifically, the
huge unearned incomes the wealthy receive as rent-seekers), government
borrows from them and then pays them interest. Then, the government
must find some source of revenue to make the interest payments.
Imposing heavy taxes on imported goods, eliminating basic social
services and investment in public goods, and increasing taxes on
workers are then pursued while the economy continues to falter.
Keynes was hardly unique in being blind to (or, at least largely
silent on) the operation of land markets and their role as the central
engine of rising prices and crashing markets. At the direction of
Lloyd George, Keynes and other economists had been called upon to
participate in a Liberal Land Committee to examine what could be done
to encourage the return of people to work in agriculture and to bring
land back into production. And, in fact, Keynes became one of Lloyd
George's most important advisers on matters of economic policy.
Britain remained deep in recession during the 1920s, and Keynes played
a central role in two studies - Britain's Industrial Future
(1928) and We Can Conquer Unemployment (1929). Despite the
commitment by Lloyd George to doing something about the land question
in Britain, Keynes declared: "
I believe that this
question, in its traditional form, has now become, by reason of a
silent change in the facts, of very slight political importance."[36]
Exactly what constituted this "silent change in the facts"
Keynes did not say. Later, he would write of the diminishing
importance of agricultural production to the economies of developed
nations able to purchase agricultural products in a very competitive
global market. In the emerging industrialized global economy, Keynes
seemed to believe, the ownership and control of land would no longer
have the same causes for concern as in the past. Keynes was putting
his hopes in social democracy and the continued improvements in
industrial productivity that would reshape the future:
If I am right in supposing it to be comparatively easy
to make capital-goods so abundant that the marginal efficiency of
capital is zero, this may be the most sensible way of gradually
getting rid of many of the objectionable features of capitalism.
A
man would still be free to accumulate his earned income with a view
to spending it at a later date. But his accumulation would not grow.
Though the rentier would disappear, there would still be room,
nevertheless, for enterprise and skill in the estimation of
prospective yields about which opinions could differ.[37]
Unfortunately, Keynes and most others concerned with economic policy
failed to consider that at some point the race between population
growth and increased production of wealth would be severely tested by
rapidly escalating land costs. Other dynamics captured their attention
during the 1920s, even as land markets were spinning out of control.
The one policy that might have lifted them out of recession and
prevented the deeper and broader global depression of the 1930s was
given no consideration at all.
Faced with the consequences of their own failed policies and an
unwillingness to make the right decisions, governments resort to the
police power of the State to impose artificial equilibriums on those
who actually labor or invest savings in wealth production. Governments
first failed to collect the rental value of locations and natural
resource-laden lands, increase taxes on wealth production and commerce
to the point of discouragement and then borrow to pay expenses -- far
too frequently for programs that benefit those who are already
receiving the greatest subsidies and privileges. Finally, when more
taxes and additional borrowing would not suffice to remain current on
obligations and debt service, governments began to issue greater
quantities of paper currency. Individuals are required to accept this
paper currency at face value in repayment of government debt. Although
this initially benefits government, additional sales of government
debt instruments must post much higher rates of interest in order to
attract purchasers. Secondarily, the purchasing power of the
government's paper currency falls. How far and how fast depends upon
the amount of paper currency added to that in circulation and on the
demand for a nation's currency on the part of foreign banks. When the
actions of government too deeply infect markets and destroy
confidence, exchanges of goods for paper currency are discouraged;
trade becomes more localized and increasingly based on barter or
conducted in a foreign currency. One does not have to wait very long
for civil unrest to follow.
These conditions were prevalent and spreading quickly after the First
World War ended. "All these influences combine not merely to
prevent Europe from supplying immediately a sufficient stream of
exports to pay for the goods she needs to import," Keynes
concluded without a full understanding of the underlying forces at
work, adding: "but they impair her credit for securing the
working capital required to re-start the circle of exchange and also,
by swinging the forces of economic law yet further from equilibrium
rather than towards it, they favour a continuance of the present
conditions instead of a recovery from them."[38] Unless the
leaders of the postwar era made a real effort to work together, Keynes
warned, the immediate consequences would take the form of "[a]n
inefficient, unemployed, disorganised Europe ..., torn by internal
strife and international hate, fighting, starving, pillaging, and
lying."[39] Leaving Britain's political leaders with this
prediction of things to come, Keynes spent much of the next decade on
a crusade to overturn the worst elements of Versailles and the
temporary world order that emerged. First, he argued, the Allies must
agree to cancel all war debts. Second, European nations (and any
others who wished to join) must adopt policies of free trade. That was
the extent of the Keynesian prescription for a stable future, at least
for the moment. In Britain, political turmoil prevailed, and the
Conservative Party emerged victorious in the 1924 elections. Any hope
of addressing the land question in Britain - to serve as an
example for the rest of the world - disappeared. The publication of a
report in 1925 financed by Lloyd George, Land and the Nation,
generated debate over what policies were needed to stimulate
agricultural production and rural employment, but no legislation
emerged with the aim of capturing as public revenue the economic rent
of land. Not even a return of the Labour Party to power in 1929
changed things. In any event, time had run out for effective
incremental changes in policy. A collective implosion never before
experienced was now in the making.
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